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Miliband’s face off with the leading energy firms continued today … Lord Mandelson criticised the plans last night as taking the Labour Party back to an era in which the options for industrial policy were either state control or laissez-faire. (Front page of The Guardian and The Times). Ed Miliband has also effectively wiped £2billion off the value of leading energy firms as investors rushed to sell of shares in gas and electricity suppliers. (Front page of City AM)

Personal Finance

Figures from the Office for National Statistics reveal that half of women in Britain are still working when they reach the age of 60. In 1993 only 35.1% of women had a job when they reached the age of 60, demonstrating the impact that the rising pension age has had on a generation of women. (Pg 4, Daily Mail).

Also more stay-at-home mothers have gone back into employment in the last two years than in the previous 15 years combined, an official study suggests. This increase comes after changes to child tax benefits which led to the government being accused of forcing middle-class mothers back into work. (Front page of The Telegraph).

Property

Cuts to housing support will put England at risk of being a ‘knife-edge’ nation where people who lose their jobs will also see their homes under threat, Shelter has warned. Under the current system, renters who have not claimed housing benefit in the previous three years will have the full cost of their rent covered for up to 13 weeks if they become unemployed. But under universal credit a renter will only receive a standard amount toward their housing costs, a lot lower than the average private rent. (Pg 26, The Independent).

Recruitment

Lord Sugar failed to win back costs from Stella English (2010 winner of the Apprentice) who lost a constructive dismissal claim against him. Her claim was dismissed by an employment tribunal which said that case should never have been brought. Lord Sugar’s claim for costs was rejected by the tribunal judge who said that English “truly believed” she had a case (Everywhere).

Yesterday the Treasury said that it had lodged its objection to a new European law that caps bankers’ bonuses to the European Court of Justice. Apparently the new legislation would drive up salaries and would lead to banks finding alternative ways to boost pay, such as higher pensions. (Pg 47, The Times)…

…This news comes as one of the Conservatives’ most powerful and generous donors was at the centre of a political storm last night for his role in the Libor scandal. Icap, founded by former Tory treasurer Michael Spencer, has been fined a total of £55million on both sides of the Atlantic. (Front of The Independent).

Lending to landlords had surged to a near five year high with £5bn of buy to let mortgages advanced in the second quarter of the year. This represents a rise of 21% compared with the previous year and The announcement that the low base rate is likely to continue until 2016 is forcing savers to look for more profitable investments, in particular property rentals. The news comes as LSL figures published today show house prices have risen by 2.6% over the past year. However, it is not all bad news for first time buyers as e.surv figures show a 56% rise in high LTV lending over the past year.

Personal Finance

The baby boomer generation is reaching pension age at record rates according to the ONS. It represents a major cash outflow for the government with pension payments rising by nearly £18bn since the first baby boomer women drew their pensions at the age of 60 in 2005. Over 65s are one of the richest demographic groups and over 50s accounted for nearly half of all household spending in 2012.

Recruitment

More women should be appointed to work at the Bank of England according to Mark Carney. The Governor of the Bank has told George Osborne the lack of women in senior roles is “anomalous.” There are currently just two women in the top ranks of the bank, and the MPC has had no women serving on it for three years. It comes after Carney agreed to put Jane Austen on the new £10 note at the start of July.

Corporate

Tesco’s retreat from overseas expansion continues as it merged its Chinese operation with the state owned rival. It’s 131 store network in China is to be amalgamated with Vanguard, following the closing of its Japanese and American businesses. Last year, growth in China fell 1 per cent compared with the previous year – noted as an ominous sign in such an investment hungry country by Marcus Leroux in the Times. Chief Executive Phillip Clarke is expected to focus more on the UK business, revamping stores in its home market following the move.

Nat Rothschild has resigned from the board of London listed coal miner Bumi Plc. The resignation is the latest twist in the saga surrounding the company which has been rocked by corporate governance disputes, boardroom rifts and a plunging share price. Rothschild voiced his great regret in bringing its Indonesia backers to the capital and accused the chairman of betraying shareholders. The financier stepped down after a bust up over a £750m offer from key shareholders to cut ties with the company. Telegraph, FT, Independent

Workers who change jobs risk losing up to a quarter of their pension under plans by the government to allow employees to carry retirement funds with them. The DWP propose this scheme to prevent millions of small retirement pots lying dormant after people change jobs. Those opposing such plans say the scheme could significantly reduce the value of a pension because of the over the course of a person’s career it could involve money being transferred from good scheme with low fees and high returns into the poorly managed schemes with high charges and low returns.Telegraph

Berlin is now believed to be experiencing a property price boom. Despite the Eurozone crisis, prices have risen at an average of 37.5% since 2009 with many investors now looking to Berlin as a safe haven should the currency union fall apart. FT

The UK’s outlook has been slashed by Fitch due to big government debts and a slower than expected economic recovery which is a major blow to the chancellor George Osborne. Fitch announced last night that it was revising the UK’s outlook from stable to negative, one week ahead of the budget, and highlighted the risks posed to economic recovery by ongoing financial tensions in the Eurozone and the still large structural budget deficit and high and rising government debt. Allister Heath writing in CityAM says this puts the chance of a downgrade at slightly over 50% over the next two years.

Personal Finance

Food prices are set to surge as droughts across England and rising oil prices combine to drive inflation, analysts are warning. Signs of growing inflationary pressure, already evident at the petrol pumps, come at a time when British shoppers were expecting a breather. Olympic and jubilee celebrations will also “set reasonable alarm bells for inflationary pressure on season food lines”.

New EU unisex pension rules will mean lower pensions for men while much criticised solvency controls on how insurers invest money could push up pension costs for everyone.

Property

The jury appears to be out on the benefits to be bestowed on the UK’s three newest cities – St Asaph, Chelmsford and Perth have been awarded city status to mark the Queen’s Diamond Jubilee. In the case of St Asaph’s up until now it has only being able to boast five pubs and a cash point.

George Osborne is expected announce the return of 100 year bonds, last seen in the First World War, in his budget speech next week. The long term bonds are designed to lock in low interest rates which the Chancellor will claim reflect confidence in his austerity measures, as the Office for Budget Responsibility warns that even a 1% rise in borrowing rates for the Government could land taxpayers with a £20bn bill. Investors are divided over the bonds, with some saying they like the idea of security and a fixed income for such a long period, and others saying they would be reluctant to buy such debt because of low returns.

Personal Finance

Tesco is the first company to change its pension age from 65 to 67, affecting around 170,000 staff members. Staff will still be able to retire at 65 but would be around 15%-20% worse off. The supermarket is also expected to switch the pensions link from RPI to the lower CPI. While Tesco is certain to face a backlash, many other firms are expected to follow suit as they attempt to reform unaffordable pension schemes. Patrick Hosking in the Times argues that while tesco will try to play the changes down, its sheer size, its role as an early adopter of auto enrolment pensions and its generous scheme mean that these are big decisions that will make significant savings for the company.

Property

Christine Patterson in the Independent writes on our love affair with property, saying that we have become a nation of winners and losers – those above 45 who bought cheaply and those below 45 who find that even a one bedroomed flat is 10-15 times their salary. While government measures such as the resurrection of Right to Buy and the NewBuy scheme help those affected, Patterson argues that we need to build more houses to increase supply and normalise prices, and start looking at houses as places to live rather than dreams

Economic News
QE is being blamed for a rise in the corporate pensions shortfall. The National Association of Pension Funds says that corporate pension shortfalls across the FTSE 350 have risen by £90m since the Bank of England resumed gilt purchases last October. The total shortfall stands at £470.7bn currently, 3 years after QE started. The NAPF says it does support the measures intended to bolster the economy despite the detrimental side-effects of QE on corporate and personal pension schemes, however it warns that making up the deficit could divert corporate funds from investment and job creation. The NAPF has also called on the Pensions Regulator to give companies more time to make good on their shortfalls. FT p1 Times p3

Personal Finance
‘Squeezed middle’ families to be spared cut in child benefit. Hundreds of thousands of middle-class families are expected to be spared a cut in child benefit as part of a Budget that will aim to shift the pain of deficit reduction from middle and low earners to the wealthiest. People earning between £43,000 and £50,000 are likely to retain payouts, Treasury sources have briefed the FT. It is expected that this will be paid for in part by reducing the cap on higher rate tax relief on pension contributions, which will mostly affect people earning more than £100,000. FT p2

Meanwhile it is reported that more than five million middle class retired people could be freed from paying tax on their state pensions, Daily Telegraph p1

Property
Commuters face paying even more at peak time as Government is expected to announce a new strategy for rail fares and subsidies today. Pricing is expected to mirror airline pricing with fares on full trains even higher and those on empty trains even lower than at present. Daily Mail, p25

Although a Greek bailout appears to be close, Moody’s has threatened to slash the credit scores of more than 100 European banks in the wake of the debt crisis. This could impact on UK banks’ abilities to fund themselves in financial markets, potentially hampering their ability to lend further. Moody’s blames the deteriorating economic outlook, with ECB forecasters predicting a contraction of 0.1% in the eurozone in 2012. But closer to home, more encouraging noises are coming from UK manufacturing this year as car production hit a 16 month high in January. Hugo Duncan and Peter Campbell, Daily Mail, p.67; Julian Harris, City AM, p.2, , Independent, p.51

Personal Finance:

New data from the ONS shows the days of early retirement have passed. More than one third of men are working beyond 65, with the average retirement age reaching 64.6 for men and 62.3 for women. While several analysts argue that increasing life expectancy will put pressure on the state pension system, Norma Cohen at the FT points out that the ONS stats also suggest the cost of supporting an ageing population may be eased by immigration. FT, p.4; The Times, p.17; The Daily Mail, p.1; The Guardian, p.30

Property:

Not only is the rental sector growing but rents are still increasing. The latest LSL buy-to-let index shows rents increased “unseasonably early” last month to £712 pcm on average, the first January they’ve seen rents rise since they began their index. With rents again near a record high, it’s no surprise that Mintel’s research shows cost is a priority of 85% of renters. The increase is being driven by a groundswell of demand, with the private rented sector growing by 262,000 households in the last 12 months alone. City AM, p.15; iPaper, p.50; The Times, Bricks & Mortar, p.2, 6&7.